4 ms·

How does reduced liquidity equal lower share value? Makes no sense to me. Case in point example: SpaceX shares are very illiquid but also very very much up si

How does reduced liquidity equal lower share value? Makes no sense to me. Case in point example: SpaceX shares are very illiquid but also very very much up since SpaceX was founded.

sokoloff 2y ago
Suppose I own 0.01% of the company I work at. If that company is publicly traded, I can sell those shares to anyone. If that company is a co-op in which only employees are allowed to own shares, the only people I can sell my shares to are other employees. In general, more willing buyers (who in turn know they can they sell those shares unrestricted in the future to any buyer), increases the people willing to bid on those shares at any given moment in time. (It’s the same basic reason that you’d rather have $100 in cash than $100 gift card for Starbucks.)
- lsaferite 2y ago
  Are you even allowed to buy/sell shares in an employee owned co-op? I understood that share ownership was part of employment with the company. It entitles you to a share in the profits and a share in the decision making, but I didn't think it was a tradable instrument itself.
  - pineaux 2y ago
    This is the answer to all the above. These shares give you a right to part of the profit, but cannot be sold.
    - sokoloff 2y ago
      What does it mean to own something that you cannot sell/assign? That sounds like plain old profit sharing, not ownership.
      - dbingham 2y ago
        Ownership in the sense of governance, not of property. Worker cooperatives are organizations that are governed by their workers for their workers, not owned as property to be traded or sold.
nyssos 2y ago
> How does reduced liquidity equal lower share value? 1: Lower liquidity usually goes hand in hand with higher transaction costs, which means a bigger gap between how much the buyer pays and how much the seller walks away with. 2: Time value of money: Suppose some liquid asset can be exchanged for $X right now, and an otherwise equivalent illiquid asset can be exchanged for $X by, let's say, a month from now. $X today is more valuable than $X in a month, so no one is going to buy the illiquid asset today for $X if they could get the liquid one instead.

How does reduced liquidity equal lower share value? Makes no sense to me. Case in point example: SpaceX shares are very illiquid but also very very much up since SpaceX was founded.

sokoloff 2y ago

Suppose I own 0.01% of the company I work at. If that company is publicly traded, I can sell those shares to anyone. If that company is a co-op in which only employees are allowed to own shares, the only people I can sell my shares to are other employees. In general, more willing buyers (who in turn know they can they sell those shares unrestricted in the future to any buyer), increases the people willing to bid on those shares at any given moment in time. (It’s the same basic reason that you’d rather have $100 in cash than $100 gift card for Starbucks.)

lsaferite 2y ago
Are you even allowed to buy/sell shares in an employee owned co-op? I understood that share ownership was part of employment with the company. It entitles you to a share in the profits and a share in the decision making, but I didn't think it was a tradable instrument itself.
- pineaux 2y ago
  This is the answer to all the above. These shares give you a right to part of the profit, but cannot be sold.
  - sokoloff 2y ago
    What does it mean to own something that you cannot sell/assign? That sounds like plain old profit sharing, not ownership.
    - dbingham 2y ago
      Ownership in the sense of governance, not of property. Worker cooperatives are organizations that are governed by their workers for their workers, not owned as property to be traded or sold.

nyssos 2y ago

> How does reduced liquidity equal lower share value? 1: Lower liquidity usually goes hand in hand with higher transaction costs, which means a bigger gap between how much the buyer pays and how much the seller walks away with. 2: Time value of money: Suppose some liquid asset can be exchanged for $X right now, and an otherwise equivalent illiquid asset can be exchanged for $X by, let's say, a month from now. $X today is more valuable than $X in a month, so no one is going to buy the illiquid asset today for $X if they could get the liquid one instead.